USDZAR price forecast the rand reversing ahead of Fed address

Key Takeaways:

1. The South African Rand (ZAR) is weakening against the US Dollar (USD) as the USD regains strength and rebounds from oversold conditions.
2. The lack of scheduled economic data on the day suggests that the movement in the USD/ZAR currency pair is driven by profit-taking and caution ahead of tomorrows address by Jerome Powell
3. Markets are assessing the likelihood of another rate hike in the US, with the Federal Reserve Chair's address expected to provide further clues.
4. The CME FedWatch Tool indicates a high probability (90.4%) that the central bank will maintain the Fed Funds Rate at the meeting
5. The USD/ZAR price is currently showing signs of a bullish reversal from oversold territory and is testing a break above the 18.40 level.

The South African Rand (ZAR) is losing ground against the US Dollar (USD), which has begun to regain strength and rebound from near-term oversold conditions. This significant move comes on a day light in terms of scheduled economic data. In the absence of new directional drivers for the USD/ZAR currency pair on the day, there is a suggestion of profit-taking and caution ahead of Thursday, 9th November 2023.

Markets continue to assess the probability of another rate hike in the world's largest economy and will look to the Federal Reserve Chair's address for further clues. The final Federal Reserve Open Market Committee (FOMC) meeting for the year 2023 is scheduled for the 13th of December.

As of the 8th of November 2023, the CME FedWatch Tool suggests a 90.4% probability that the central bank will maintain the Fed Funds Rate in the 5.25% to 5.50% range at the meeting. This leaves a slim probability of 9.6% for a 0.25% rate hike at the meeting. The CME FedWatch Tool's probability estimates are derived and implied from the 30-day Federal Funds Futures rates

USD/ZAR – Trading view

The USD/ZAR price has started to form a bullish reversal from oversold territory and is testing an upside break of the 18.40 level.

For long entry we would like to see the breakout confirmed with a close back above the 18.40 level. A close above this level would confirm and suggest some upward momentum from the price reversal. In this scenario18.70 and 18.85 become upside resistance targets from the move. Traders who find long entry into the breakout might consider having a stop loss at either the 18.25 or 18.15 level (depending on risk threshold).